LONDON MARKET MID-MORNING: Banks And Miners Lead Stocks Lower

LONDON (Alliance News) - London shares are mostly lower Friday mid-morning, trading in a narrow range with the US stock market closed and ahead of the Greek referendum on its bailout provisions on Sunday.

The only UK data UK Markit services Purchasing Manager's Index, the only domestic economic data Friday, came in ahead of expectations.

The FTSE 100 is down 0.4% at 6,604.44, while the FTSE 250 is down 0.4% at 17,616.73. The AIM All-Share is outperforming, up 0.5% at 765.37.

European major indices also are slightly lower, with the CAC 40 in Paris down 0.5% and the DAX 30 down 0.3%. The US is closed Friday for to the Independence Day holiday.

The UK service sector logged strong growth in June following a temporary lull in May linked to the recent election. The headline Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose to 58.5 in June from a five-month low of 56.5 in May. It was forecast to rise to 57.5.

Data suggests that the second quarter of 2015 was the strongest on average since the third quarter of 2014. New business and employment remained strong, leading to further optimism regarding prospects for future growth. However, new order growth eased slightly, contributing to the first monthly decline in backlogs of work since March 2013. Meanwhile, input costs and output charges continued to increase in June.

?While uncertainty caused by the Greek debt crisis rules out any imminent hike in [UK] interest rates, the post-election rebound in service sector business activity adds to the likelihood of the Bank of England starting to nudge rates higher later this year," says Chris Williamson, chief economist at Markit. "The survey data are indicating an acceleration of economic growth to 0.5% in the second quarter, up from 0.4% in the first three months of the year."

The pound rose to USD1.5627 following the release of the PMI.

Meanwhile, eurozone economic growth rose to a four-year high in June, final data from Markit showed Friday. The final composite output index rose to 54.2 in June from 53.6 in May and fractionally above the flash score of 54.1. The upturn in June took the average index reading for the second quarter as a whole to a four-year high.

Additionally, eurozone retail sales growth slowed in May from the prior month, data from Eurostat showed. Retail sales climbed 0.2% month-on-month in May following a 0.7% rise in April. Nonetheless, this was the second consecutive increase and also exceeded the 0.1% growth forecast by economists.

Greece requires at least EUR36 billion from the eurozone over the coming three years on concessional terms to keep its finances sustainable, the International Monetary Fund said in a report. In a preliminary draft of its Greek debt sustainability analysis, the IMF said the funding requirement is projected to reach around EUR50 billion from October 2015 to end 2018, requiring at least EUR36 billion from European creditors on highly concessional terms.

Greece's Prime Minister Alexis Tsipras on Thursday urged Greeks to preserve "national unity" in the face of "temporary" difficulties. Tsipras has urged Greeks to opt for "no" on Sunday when they vote in a referendum he called on whether the country should accept reforms demanded by its creditors.

"While the Syriza government is trying to convince people that the referendum is not about remaining in the euro zone the European politicians are trying to make exactly that clear," says Lutz Karpowitz, analyst at Commerzbank. "That in return may turn out to be a dangerous signal to be

sending out to the financial market as it suggests that the difficulties will be easy to overcome in case of a 'yes' vote."

"Whichever way one looks at the situation: a 'yes' vote on Sunday is not going to begin to solve the situation," says Karpowitz. "The uncertainty is likely to increase next week ? in case of a 'no' vote even more so."

Opinion polls published this week suggest the Greek public is split. A GPO poll conducted for French bank BNP Paribas and reported in Greek media showed 47.1% of people planned to vote "yes" or were likely to, while 43.2% said they would vote against it or were leaning toward "no".

Outside Greece, competition authorities in Brazil are investigating fifteen of the biggest banks in the world over allegations that they colluded to influence benchmark currency rates in the South American country, Reuters reported on Thursday.

Cade, the Brazilian competition authority, allaged that banks' activity deterred competitors from the market for several years from 2007, the report said. The banks named include London-listed Barclays, HSBC Holdings, Royal Bank of Scotland Group and Standard Chartered, according to the report.

Shares in the banking stocks are lower, with Standard Chartered down 2.5%, Barclays down 1.5% and HSBC Holdings is down 1.0%. Lloyds Banking Group is also falling 1.0%.

Royal Bank of Scotland Group is down 2.1%, also after a Bloomberg report that it could face a penalty of as much as USD13 billion depending on the outcome of a US mortgage securities lawsuit. According to the report, the US Federal Housing Finance Agency, which is suing on behalf of Fannie Mae and Freddie Mac, estimated that amount in a court filing in a related case.

Shares in BP have been raised to Overweight from Neutral by JPMorgan, which increases its price target to 475p from 450p. S&P Capital IQ raises the stock to Hold from Sell, with a 460p target, up from 430p. Goldman Sach raises its price target to 376p from 364p but still says Sell. Barclays raises its price target to 600p from 560p, according to traders.

Changes from the brokers come after BP on Thursday said it has reached an agreement in principle to settle all US federal and state claims arising from the Deepwater Horizon spill in the Gulf of Mexico in 2010. BP was the biggest blue-chip raiser Thursday ending up 4.5%. Friday, BP shares are up 0.3%.

Miners also are dragging the FTSE 100 after iron ore prices suffered their largest single-day percentage loss seen in over a year overnight. BHP Billiton is down 1.9%, Rio Tinto down 1.4%, Glencore down 1.2% and Antofagasta down 0.9%.

By Daniel Ruiz; danielruiz@alliancenews.com

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